HBOS, the owner of Halifax and Bank of Scotland, today rushed to reassure investors that it was trading normally after its shares fell below the price of stock being offered to shareholders in the bank's £4 billion rights issue.

In the second trading statement the bank has issued this month, HBOS said that its fully-underwritten rights issue was proceeding according to plan.

It said: "Current trading and specifically mortgage arrears performance, is in line with the group's expectations."

Shares in HBOS fell below the 275p rights issue price this morning and slumped to 262p in early afternoon trading amid a general fall in the sector.

However, the statement issued by HBOS to the London Stock Exchange at 3.30pm failed to significantly improve sentiment, with shares remaining below the offer price at 268p.

HBOS will update the market on trading when it releases the prospectus for the capital raising mid-next week.

Shareholders are sensitive about bad home loans after Bradford & Bingley was last week forced to re-jig its £400 million rights issue after being hit by an unexpected rise in mortgage arrears.

Sir Fred Goodwin, chief executive at Royal Bank of Scotland, which recently closed a £12 billion rights issue, said this morning that trading continued to be difficult.

He said: “It’s difficult to see it will take less than 12 months to work its way through. There's still more bad news than good news".

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